Glacier Oil & Gas Corp. took a cautious approach to development after it acquired the Alaska assets of Miller Energy Resources Ltd. in a bankruptcy case in early 2016.
The current economic situation has increased that caution.
After rightsizing its portfolio and deferring some exploration work, the local independent drilled just two sidetracks across its four Alaska properties over the past year, choosing instead to focus on workover activities and a major infrastructure consolidation project.
Through its subsidiary Cook Inlet Energy LLC, Glacier operates the West McArthur River and Redoubt units on the west side of Cook Inlet and the North Fork unit in the southern Kenai Peninsula. Through its subsidiary Savant Alaska LLC, Glacier operates the Badami unit on the eastern North Slope. Those projects make Glacier the only operator aside from Hilcorp Alaska LLC with production in Alaska’s two major basins.
The Redoubt unitSince the end of the bankruptcy case, Glacier has focused much of its development resources on its two west side properties: the Redoubt and West McArthur River units.
Glacier drilled the 14,849-foot slightly deviated RU No. 7B sidetrack of the RU 7A well in late 2016, and later conducted hydraulic fracture stimulation of the sidetrack. The results of the project will determine future projects, which could include replacing electric submersible pumps at the RU No. 1A and RU No. 5B wells and hydraulically fracturing the RU No. 1A, RU No. 5B and RU No. 9 wells, according to the company.
Glacier drilled the 16,482-foot deviated RU No. 3A sidetrack in May 2017. The injection well will be used to improve oil production. The company is also reviewing its waterflood program to determine if it should convert non-producing wells to injection.
Also during the past year, Glacier swapped out a gas-fired boiler at the Osprey platform with an electric heating system that uses excess power from the Kustatan Production Facility. Longer term, the company wants to begin a delineation program in the Central, Southern and Northern fault blocks. The company is considering an exploration program north of the Northern fault block “when favorable economic conditions warrant.”
Redoubt produced 345,801 barrels of oil in 2015, 233,416 barrels in 2016 and 149,786 barrels in the first six months of 2017, according to the Alaska Oil and Gas Conservation Commission. Cumulative production through June 2017 was some 4 million barrels.
The West McArthur River unitIn the biggest West McArthur River unit development, Glacier decommissioned the West McArthur River Production Facility and shifted over to the Kustatan Production Facility.
While as many as 2 million barrels of recoverable oil remain at the West McArthur River unit, according to the company, the aging facility was reaching the end of its useful life.
The newer and more efficient Kustatan facility can process some 25,000 barrels of fluid per day and can store 50,000 barrels. The Redoubt unit is only producing some 1,000 barrels per day, leaving plenty of room for West McArthur River unit oil production.
The consolidation project involved many technical considerations but also some administrative ones, such as receiving permission to use multi-phase flow meters. The meters allow the company to jointly process oil from the West McArthur River unit and the Redoubt unit through a single facility and to tabulate the two streams separately.
In addition to the consolidation project, Glacier conducted a four-well workover program. The company swapped out jet pumps for electric submersible pumps at the WMRU No. 2B, WMRU No. 5, WMRU No. 6 and Sword wells, which reduced the need for power fluid.
The company also perforated additional zones in WMRU No. 2B and WMRU No. 5. The workover program slowed production somewhat in 2016 but added “significant” production at the unit after the wells resumed operations, according to Glacier. The company said it would continue conducting workover activities over the coming year.
In a recent development plan and other permitting documents, Glacier said it would resume exploration activities at the unit this year by returning to the long-delayed Sabre well. The company deferred the well in May 2017, blaming fiscal uncertainty in the state.
The West McArthur River unit produced almost 479,488 barrels of oil in 2015, 360,373 barrels in 2016 and 234,314 barrels in the first half of 2017, according to the Alaska Oil and Gas Conservation Commission. Cumulative oil production through June 2017 was more than 14.8 million barrels. The unit produced 194.2 million cubic feet of natural gas in 2015, 138.6 million cubic feet in 2016 and 62.1 million cubic feet in the first half of 2017. Cumulative gas production through June 2017 was more than 3.8 billion cubic feet.
The North Fork unitIn announcing its plans for the North Fork unit, Glacier said it would pursue a series of “small ball” projects, rather than attempting a major development program at the unit.
A plan of development submitted in December 2016 listed various efforts to improve production from existing wells, including the installation of additional compression and separation facilities, the reprocessing of a previous seismic survey over the area and planned workover operations on the existing NFU No. 14-25 and NFU No. 41-35 wells.
As for its ongoing efforts to “fully delineate and develop all fault blocks within the current unit” through development drilling, Glacier said the work would resume “as appropriate based on data review and market conditions.” The company specifically mentioned a NFU No. 42-35A sidetrack and a NFU No. 22-26 or a NFU No. 14-26 well.
The company is also considering several major infrastructure plans.
One is to expand the existing North Fork pad to accommodate new compression and dehydration equipment. Another is to build a second drilling pad to better develop the reservoir. A third is to drill outside the North Fork Gas Pool No. 1 participating area.
Glacier attributed its cautiousness to low oil prices and a constrained natural gas market.
The scaled-down development plan also followed a year when Glacier was unable to fulfill the work commitments made by its predecessor before the bankruptcy case.
Through Cook Inlet Energy, Miller had committed to sidetracking the NFU No. 42-35, drilling the NFU No. 14-26 well and potential drilling another delineation well.
Glacier was unable to complete those tasks, citing the bankruptcy case, oil prices and market conditions such as consolidation, warmer winters and fewer big users. Instead, the company reprocessed existing seismic and perforated new zones in existing wells.
In a letter approving the current development plan, Division of Oil and Gas Director Chantal Walsh called the difference between the proposed development plan and the actual work “significant” and added that a constrained market was not “force majeure.”
The North Fork unit produced 3.2 billion cubic feet of natural gas in 2015, 2.2 billion cubic feet in 2016 and 1.1 billion cubic feet through the first half of 2017, according to the AOGCC.
Cumulative production through June 2017 was more than 16 billion cubic feet.
The Badami unitGlacier recently made a shift in its strategy at the Badami unit.
In its plan of development from April 2017, the company announced plans for an exploration well and for infill drilling away from the existing unit development, rather than drilling new development wells and stimulating existing development wells.
Glacier inherited the Badami unit from Miller Energy, which acquired operator Savant Alaska LLC and its 67.5 percent working interest in the unit in the latter half of 2014.
Around the time of the acquisition, Savant was planning to hydraulically fracture two existing Badami wells and drill two new wells at the unit. The project was postponed in late 2014 and early 2015 because the company was unable to get equipment to Badami in time to complete the activities before the end of the open water season in the Arctic.
In a plan of development submitted in early 2016, Glacier - through Savant - told the state it was “unable to justify the expense” of the development program at the moment and would pursue the stimulation and drilling projects “as economic conditions warrant.”
Instead of conducting major development activities, Glacier performed minor workover operations at the B1-11A and B1-36 wells. The operations identified 321 feet of additional zones in need of perforation, which the company performed in November 2015. The work increased production by 369 barrels per day, according to the company.
Glacier also told the state it was undergoing internal evaluations to determine what opportunities exist. Those evaluations included a geologic and geophysical review of the “Badami and Killian sands and associated producing wells,” as well as “historical wells and field structure.” The company also reviewed potential targets outside the Badami Sands participating area, including the Killian Sands on the eastern end of the unit.
The reviews identified “several new target ‘pods’ of interest,” according to Glacier.
The company said it was planning to use Rig 36 to drill an exploration well in the Starfish prospect. The well would target the Badami and Killian sands southwest of the current development within the Badami Sands participating area. The company also said it was considering other drilling opportunities outside of the existing participating area.
As for development within the Badami Sands participating area, Glacier said it would resume its drilling and stimulation program “as economic conditions warrant.”
Badami produced 346,998 barrels of oil in 2015, 363,288 barrels in 2016 and 159,659 barrels through the first half of 2017, according to the Alaska Oil and Gas Conservation Commission. Cumulative oil production through June 2017 was 7.9 million barrels.